A glimpse of the trends shaping the strategy in 2017
by Gregg M. Schoppman
January 19, 2017

The new year comes with both an equal balance of guarded optimism and nervous trepidation. The election cycle has concluded, and the only inalienable truth that everyone can agree on is the satisfaction of no more political advertisements blotting the airwaves. However, regardless of affiliation or outcome, construction leaders will need to rise up and lead their businesses through a quagmire of obstacles, challenges and potential opportunities in 2017. Industry changes seem to occur at the speed of light, while adopting suitable strategies tends to lag. Some of the reluctance lies in the perception that certain contextual or environmental factors will be short lived. On the other hand, there is also a fair amount of “behavioral inertia” that must be overcome. Best-in-class firms create a strategic plan that adequately sifts through the tea leaves to make smart decisions for the future.

Data-Driven Strategy

Organizations sit on a treasure trove of information, but they either lack the system or the capability to mine that data successfully. Whether the goal is understanding the true costs associated with managing specific projects or understanding which clients allow a firm to be the most profitable, firms must routinely gather and analyze this data. Furthermore, firms must continue to dig deeper to understand some of the following influencing factors.

  • What drives your customers’ business? Supply, demand, population growth, support businesses, etc.
  • What KPIs, whether internal or external, will drive a firm’s strategy? Customer feedback, productivity performance, market penetration, etc.
  • What macroeconomic forces should a firm understand? GDP, AIA billings index, populations changes, etc.
  • What triggers are in place to help a firm make fact-based decisions? Backlog growth/depletion, manpower histograms, equipment utilization, etc.

The Labor Crisis

Whether it is good or bad, there remains a labor crisis associated with the construction industry. In some cases, the ability to staff construction projects successfully has provided a regulator for some firms to avoid overextension. But there appears to be no real solution on the horizon. Market forces may well dictate the supply of labor, thus limiting firm capabilities. However, there are examples of best-in-class firms maintaining a proactive stance within high schools, technical schools, vocational schools and colleges and driving the right people to their cause. Keep in mind, sourcing the labor is only part of the dilemma. Having the right culture to retain a strong workforce is critical. Training, development and performance-driven compensation are also critical elements.

Performance-Driven Compensation Systems

The “black box” approach to compensation or the year-end Christmas bonus are both becoming antiquated and obsolete. Successful firms are migrating towards performance-driven compensation models. To be clear, this is not project-based compensation, as that opens a whole host of additional issues.

Today’s emerging workforce wants to see transparency in their compensation. High performers also want to know that their efforts are being rewarded. It goes without saying that retention of high performers is essential for both short-term and long-term strategic reasons. Firms that are implementing performance feedback, career path discussions and true, performance-driven compensations tend to attract better associates, thus becoming a talent magnet.

Innovation

High performers want to be on the cutting edge. This is not limited to technology, but it certainly does play a role. Social media, GPS technologies, prefabrication, modularization, automation and drone technology are not new solutions, but they all certainly play a role in attracting talented individuals. These tech solutions either play a part of lead-specific areas to leverage better productivity, enhance job performance or drive a better product to the end-user. Is your firm fully committed to innovating, or are you just dabbling?

Succession Woes

Firms, and particularly their leadership, are not getting any younger. There are many firms that still resist developing a proactive succession plan for ownership. Keep in mind that this is easily a 10-year process. Finding the right candidates is not enough. It is also important to consider the financial model that will allow ownership transfer to take place in a fair, equitable way. This trend is hardly limited to ownership. Firms across the board are getting older at the key stakeholder level. Succession will remain a key factor for firms in the next 5 to 10 years, but it is only exacerbated by the state of the talent pool for the industry.

Being Attractive in the Now

Best-in-class firms are focusing on rebranding themselves. Rebranding themselves as “solutions providers” sounds kitschy and clichéd, but the ones that do it successfully, through deliberate and disciplined planning, have opened doors to new markets, customers and sources of labor. For instance, by taking a chapter from the professional services industry, trade contractors are using this rebranding to appear “gray collar” to potential customers and employees alike to find work in nontraditional areas.

Marketplaces

Once again, by employing a data-driven strategy, firms are looking at geographies differently. For instance, port cities, such as Jacksonville, Florida, and Charleston, South Carolina, continue to remain darlings because of the expansion of the Panama Canal. While it is not the only reason for success, thinking macroeconomically has enabled firms to be positioned better to allow for successful growth and opportunities for superstars. Before everyone thinks about planting a flag in Jacksonville or Charleston, it is important to look at other drivers, though.

For instance, look at the impact of Amazon and Jet. Distribution centers will continue to be important areas of the American economy as the world of e-commerce morphs yet again. Furthermore, as innovation continues in the autonomous vehicle arena, there will be continued opportunities. Even if building millions of square feet of distribution space does not fit in to your firm’s strategy, ancillary business opportunities will abound.

The one common denominator is uncertainty. In spite of the new things on the horizon, there is always the specter of war, terrorism and other insidious outcomes that will shake the foundation of America. The term “Black Swan effect” came into vogue after the last great recession.

While the financial crisis created one of the most devastating economic disasters in modern times, it, too, passed with time. It is difficult, if not impossible, to plan for such events.

However, best-in-class firms will use these projected trends to help drive a strategic plan that creates success, regardless of the world's current craziness.